HomeMy WebLinkAboutItem 18 - ICRMA JPA Renewal / Broker Agreement / Associated Premiums and Costs Human Resources
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Item # 18
City of Santa Ana
20 Civic Center Plaza, Santa Ana, CA 92701
Staff Report
August 1, 2023
TOPIC: ICRMA JPA Renewal / Broker Agreement / Associated Premiums and Costs
AGENDA TITLE
Approve Renewal of Joint Powers Authority Agreement between the City of Santa Ana
and Independent Cities Risk Management Authority (ICRMA), and Agreement between
the City of Santa Ana and Arthur J. Gallagher and Approve Appropriation, Associated
Insurance Premiums, Costs, Programs, and Regulatory Fees for an Amount Not to
Exceed $11,625,000 (Non-General Fund)
RECOMMENDED ACTION
1. Authorize the City Manager to approve the Agreement between the City of Santa
Ana (“City”) and Arthur J. Gallagher, broker of record, from July 1, 2023 to June 30,
2024, for insurance brokerage services, subject to non-substantive changes
approved by the City Manager and City Attorney.
2. Authorize the City Manager to approve payment of insurance premiums and
associated programs to ICRMA in an amount not to exceed $7,500,000 protection of
City assets, from July 1, 2023 to June 30, 2024 including but not limited to:
a. Excess Liability Program
b. Excess Workers’ Compensation Program
c. Auto Physical Damage Program
d. Property and Equipment Program
e. Crime Program
f. Cyber Program
g. Associated Programs
3. Authorize the City Manager to approve payment of insurance premiums to Arthur J.
Gallagher, Broker, in an amount not to exceed $3,325,000 for ancillary coverages of
City’s assets, from July 1, 2023 to June 30, 2024 including but not limited to:
a. General Liability Buffer Program
b. Workers’ Compensation Buffer Program
c. Earth Movement & Flood and Difference in Coverage Program
d. Terrorism Insurance Program
e. Underground Storage Tank and Environmental Program
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4. Authorize the City Manager to approve funding to cover FY 2023/24 City Special
Events Insurance for events including but not limited to Fourth of July fireworks
show, winter events, and other City-sponsored events as created and held, in an
amount not to exceed $300,000.
5. Authorize the City Manager to approve the City’s obligation to pay the State of
California DIR estimated assessment in the amount not to exceed $500,000.
6. Approval of the Appropriation Adjustment will recognize $1,300,000 in Liability and
Property Insurance Revenue, Prior Year Carryforward revenue account (No.
08009002-50001) and appropriate the same amount into the Liability & Property
insurance account (No. 08009051-64010). (Requires five affirmative votes)
DISCUSSION
Staff is recommending renewal with ICRMA, a joint powers authority formed in 1980 in
accordance with California Government Code Section 6500. ICRMA’s purpose is to
provide: 1) excess and re-insurance to protect members from extensive financial debt
due to large claims, settlements, and judgments, 2) group insurance purchasing power
that can offer broader coverage at a lower cost, 3) rate stability, and 4) protect individual
member cities through pooling of losses and self-insurance. ICRMA also offers to its
members actuarial services, appraisal services, loss control assessments and
recommendations, safety trainings, claims audits, contract risk transfer consultation,
and other services and resources. Currently comprised of 14 California cities, Santa
Ana joined ICRMA in July 2019.
For this renewal period:
•The City’s Workers’ Compensation coverage experienced an increase of
approximately thirteen percent (13%).
•The City’s Liability and Property premiums increased approximately twenty-one
percent (21%).
•The City’s Cyber experienced a 10% decrease in premium along with enhanced
coverages.
Cost of insurance continues to increase primarily due to the following ongoing reasons:
1. An insurance market with continually decreasing excess carriers willing to quote
municipal government entities in California, primarily those with Police departments;
2. A continuing rise in jury awards and settlement amounts;
3. A rising amount of ADA claims in both cyber and physical environments;
4. The continual rise in frequency of vehicle collisions and costs for repair and
replacement of damaged vehicles, property, and equipment;
5. Aging City infrastructure including sidewalks, streets, and buildings; and
6. Increasing instances of sexual molestation and abuse.
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QUOTED & ESTIMATED PREMIUMS & FEES
WORKERS’ COMPENSATION COVERAGES FY 2021/22 FY 2022/23 FY 2023/24
Excess Pool Workers’ Compensation
Program $ 298,553 $ 345,678 $ 415,464
Excess Workers’ Compensation
Buffer $ 240,118 $ 257,356 $ 264,085
Total $ 538,671 $ 603,034 $ 679,549
Percent Change -7%12%13%
LIABILITY AND PROPERTY COVERAGES FY 2021/22 FY 2022/23 FY 2023/24
Excess Pool Liability Program $ 3,936,181 $ 5,123,142 $ 6,070,925
Auto Physical Damage Program $ 119,215 $ 129,488 $
145,108
Property & Equipment Program $ 472,724 $ 485,380 $ 593,557
Crime Program $ 11,914 $ 14,233 $ 15,394
Cyber Program $ 66,441 $ 111,964 $ 100,445
Excess Liability Buffer $ 993,265 $ 1,233,321 $ 1,743,398
DIC Earth Movement & Flood $ 985,856 $ 1,126,819 $ 1,283,147
Terrorism $ 12,330 $ 13,164 $ 13,723
Underground Storage Tanks-
Environmental $ 10,157 $ 11,112 $ 12,761
Total $ 6,608,083 $ 8,248,623 $ 9,978,458
Percent Change 69%25%21%
FY 2021/22 FY 2022/23 FY 2023/24
City Special Events Insurance $ 300,000
State of California DIR $ 500,000
Total $ 11,458,007
ENVIRONMENTAL IMPACT
There is no environmental impact associated with this action.
FISCAL IMPACT
The recommended action includes appropriating $1.3 million of the General Liability
fund balance. The following table compares the most recent actuarial valuation for
claims liability to the estimated fund balances in the Workers Compensation and
General Liability funds. Actuarial estimates of the liability are more than the City has on
deposit.
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Workers Compensation General Liability
Actuarial Valuation as of
June 30, 2023
$44,631,000 $26,456,000
Estimated fund balance as
of June 30, 2023
$16,739,939 $14,190,056
Estimated Shortfall $27,891,061 $12,265,944
After appropriation adjustment, the following table summarizes the funds budgeted and
available for estimated premium and administrative costs.
Fiscal
Year
Accounting Unit
– Account No
Fund
Description
Accounting Unit –
Account No.
Description
Amount
2023-24 08209054-64010
Workers
Compensation
Workers
Compensation,
Insurance Payment
$ 1,300,000
2023-24 08009051-64010
Liability &
Property
Insurance
Liability & Property
Insurance, Insurance
Payment
$ 9,036,300
APPROPRIATION ADJUSTMENT
2023-24 08009051-64010 Liability &
Property
Insurance
Liability & Property
Insurance, Insurance
Payment
$ 1,300,000
Total:$ 11,636,300
EXHIBIT(S)
1. Agreement with Arthur J. Gallagher Insurance Brokers of California, Inc. For
Insurance Broker Services, Client Service Agreement
Submitted By: Jason Motsick, Executive Director Human Resources
Approved By: Kristine Ridge, City Manager
AGREEMENT FOR CONSULTANT SERVICES BETWEEN
CITY OF SANTA ANA AND ARTHUR J. GALLAGHER RISK
MANAGEMENT SERVICES LLC
INSURANCE BROKER SERVICES
THIS AGREEMENT is made and effective as of August 1, 2023 between the City of Santa
Ana, a municipal corporation (hereinafter referred to as “City"), and Arthur J. Gallagher Risk
Management Services LLC, a Delaware limited liability company (hereinafter referred to as
"Consultant"). City and Consultant are also referred to collectively as “the Parties” or singularly
as a “Party.” In consideration of the mutual covenants and conditions set forth herein, the Parties
agree as follows:
1.TERM
This Agreement shall commence on August 1, 2023, and shall remain and continue in
effect until tasks described herein are completed, but in no event later than August 31, 2026
unless sooner terminated pursuant to the provisions of this Agreement. The Parties acknowledge
that Consultant has been providing services since July 1, 2023. This Agreement can be canceled
by either Party with thirty (30) days written notice to the other Party.
2.SERVICES
Consultant shall perform insurance brokerage services for the placement of the City of
Santa Ana’s insurance programs as outlined in Exhibit A.
3.PERFORMANCE
Consultant shall at all times faithfully, competently and to the best of his or her ability,
experience, and talent, perform all tasks described herein. Consultant shall employ, at a minimum,
generally accepted standards and practices utilized by persons engaged in providing similar
services as are required of Consultant hereunder in meeting its obligations under this Agreement.
4.PAYMENT
a.The City agrees to pay Consultant for insurance premiums invoiced for
insurance placements.
b.Consultant will submit invoices for insurance premiums. Invoices shall be
submitted once insurance coverage is bound. Payment shall be made within thirty (30) days of
receipt of each invoice as to all non-disputed fees. If the City disputes any of Consultant's fees, it
shall give written notice to Consultant within thirty (30) days of receipt of an invoice of any disputed
fees set forth on the invoice.
5.LEGAL RESPONSIBILITIES
The Consultant shall keep itself informed of all local, State and Federal ordinances, laws
and regulations which in any manner affect those employed by it or in any way affect the
performance of its service pursuant to this Agreement. The Consultant shall at all times observe
and comply with all such ordinances, laws and regulations. The City, and its officers
and employees, shall not be liable at law or in equity occasioned by failure of the Consultant to
comply with this section.
6. RELEASE OF INFORMATION
a. All information gained by Consultant in performance of this Agreement shall
be considered confidential and shall not be released by Consultant without City's prior written
authorization. Consultant, its officers, employees, agents or subcontractors, shall not without
written authorization from Risk Management Department or unless requested by the City
Attorney, voluntarily provide declarations, letters of support, testimony at depositions, response
to interrogatories or other information concerning the work performed under this Agreement or
relating to any project or property located within the City. Response to a subpoena or court order
shall not be considered "voluntary" provided Consultant gives City notice of such court order or
subpoena.
b. Consultant shall promptly notify City should Consultant, its officers,
employees, agents or subcontractors be served with any summons, complaint, subpoena, notice
of deposition, request for documents, interrogatories, request for admissions or other discovery
request, court order or subpoena from any party regarding this Agreement and the work
performed there under or with respect to any project or property located within the City. City
retains the right, but has no obligation, to represent Consultant and/or be present at any
deposition, hearing or similar proceeding. Consultant agrees to cooperate fully with City and to
provide City with the opportunity to review any response to discovery requests provided by
Consultant. However, City's right to review any such response does not imply or mean the right
by City to control, direct, or rewrite said response.
7. NOTICES
Any notices which either party may desire to give to the other party under this Agreement
must be in writing and may be given either by (i) personal service, (ii) delivery by a reputable
document delivery service, such as but not limited to, Federal Express, that provides a receipt
showing date and time of delivery, or (iii) mailing in the United States Mail, certified mail, postage
prepaid, return receipt requested, addressed to the address of the party as set for th below or at
any other address as that party may later designate by Notice. Notice shall be effective upon
delivery to the addresses specified below or on the third business day following deposit with the
document delivery service or United States Mail as provided above.
Mailing Address: City of Santa Ana
20 Civic Center Plaza, M-28
Risk Management, 4th Floor
Santa Ana, CA 92701
AND
City Clerk
City of Santa Ana
20 Civic Center Plaza, M-30
Santa Ana, CA 92702
To Consultant: Arthur J. Gallagher & Co., Insurance Brokers of
California., Inc.
Susan J. Blankenburg
San Francisco, CA 94111
415-536-8417
Susan_Blankenburg@ajg.com
8. ASSIGNMENT
The Consultant shall not assign the performance of this Agreement, nor any part thereof,
nor any monies due hereunder, without prior written consent of the City. Upon termination of this
Agreement, Consultant's sole compensation shall be payment for actual services performed up
to, and including, the date of termination or as may be otherwise agreed to in writing between the
City Council and the Consultant.
9. LICENSES
At all times during the term of this Agreement, Consultant shall have in full force and effect,
all licenses required of it by law for the performance of the services described in this Agreement.
10. GOVERNING LAW
The City and Consultant understand and agree that the laws of the State of California shall
govern the rights, obligations, duties and liabilities of the parties to this Agreement and also govern
the interpretation of this Agreement. Any litigation concerning this Agreement shall take place in
the municipal, superior, or federal district court with geographic jurisdiction over the City of Santa
Ana. In the event such litigation is filed by one party against the other to enforce its rights under
this Agreement, the prevailing party, as determined by the Court's judgment, shall be entitled to
reasonable attorney fees and litigation expenses for the relief granted.
11. ENTIRE AGREEMENT
This Agreement contains the entire understanding between the parties relating to the
obligations of the parties described in this Agreement. All prior or contemporaneous agreements,
understandings, representations and statements, oral or written, are merged into this Agreement
and shall be of no further force or effect. Each party is entering into this Agreement based solely
upon the representations set forth herein and upon each party's own independent investigation of
any and all facts such party deems material.
12. AUTHORITY TO EXECUTE THIS AGREEMENT
The person or persons executing this Agreement on behalf of Consultant warrants and
represents that he or she has the authority to execute this Agreement on behalf of the Consultant
and has the authority to bind Consultant to the performance of its obligations hereunder. The Risk
Management Department is authorized to enter into an amendment on behalf of the City to make
the following non-substantive modifications to the agreement: (a) name changes; (b) extension
of time; (c) non-monetary changes in scope of work; (d) agreement termination.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed the
day and year first above written.
CITY OF SANTA ANA Arthur J. Gallagher & Co.
By: By:
Kristine Ridge
City Manager Michael Gallagher, Area President
ATTEST:
By:
Jennifer Hall
City Clerk
APPROVED AS TO FORM:
Sonia R. Carvalho
City Attorney
By:
Laura A. Rossini CONSULTANT
Chief Assistant City Attorney Arthur J. Gallagher & Co.
Susan J. Blankenburg
1255 Battery Street, Suite 450
San Francisco, CA 94111
(415) 536-8417
Susan_Blankenburg@ajg.com
PM Initials:
Date:
CLIENT SERVICE AGREEMENT
EXHIBIT A
The following outlines Services provided by Gallagher over the term of this Agreement:
Use its best efforts to secure the following lines of insurance coverage on Client's behalf:
o List of Insurance Placements:
Underground Storage Tanks
Excess Liability (Buffer)
Excess Workers' Compensation (Buffer)
Terrorism
Difference in Conditions (Earth Movement & Flood)
Work with Client to prepare comprehensive underwriting data and criteria for insurance carrier
negotiations.
Formally present coverage submissions to agreed upon insurance carrier(s) and negotiate terms
on behalf of Client.
Summarize the results of executing the marketing strategy developed with Client and
communicate program recommendations.
Provide consultation to Client on exposures, existing coverage, and the desirability and/ or
feasibility of potential program changes, retention and data analysis as recommended by
Gallagher.
Request change endorsements, when requested by the Client or when otherwise necessary,
ensuring accuracy and delivery in a timely manner.
Administration of insurance program (only if applicable), including policy review and issuance,
invoicing, coordination and/ or issuance of required documentation, i.e., certificates of insurance,
and other program administration, as required by the Client.
Review accounting and billing data; audit information from insurance carriers to ensure accuracy.
Other Services:
o Risk Control Services
o Loss control consultation and claim advocacy
o Certificate Tracking